Discussion:
1. Graph the marginal cost, marginal revenue, and demand schedules for your product, and submit the graph along with your record of prices.
• Explain your reasoning in the trial rounds. Looking back, would you have done anything differently?
• Show why producing and selling one unit beyond the optimal quantity would decrease profit in your market.
Answer true or false and explain your answer: Monopolists must choose both price and quantity but competitive firms only choose quantity. Describe to your grandmother (or to mine, if yours happens to be an economist) why marginal revenue must be equal to marginal cost at the profit-maximizing level of output. Calculate the elasticity of demand at your profit-maximizing level of output. Use the point elasticity formula. Is demand elastic or inelastic at the optimal price? Why? Suppose the government imposes a new fixed tax of $10 per round as an operating fee, regardless of the amount produced. Consider the following questions:
• How would this influence the optimal price and quantity choice of your firm in the short run?
• How would this influence the optimal price and quantity choice of your firm in the long run?